Five years ago it would have been unthinkable, but today is one global movement convinced that the world’s largest corporations are engaged in stealth warfare to turn liberal democracies into neo-communist dictatorships.
At the core of this business-led Marxist revolution, apparently, is the trend for companies to not only focus on profit maximization, but also to consider environmental, social and governance (ESG for short) responsibilities.
According to ESG opponents, democracy is going downhill as a result road to socialism – or worse.
Reportedly at the center of this sinister scheme is the American company BlackRock and its CEO, Larry Fink. BlackRock is the world’s largest fund manager and overseer more than 10 trillion dollars in investments on behalf of clients, such as pension funds. Fink receives more than $30 million a year and his net worth is estimated at more than $1 billion.
You would think that this would make Fink a very unlikely champion at destroying capitalism. But because of his support for ESG – particularly for companies taking action on climate change – he has been accused of promoting a form of “corporate socialism”, with ESG criticized as “socialism in sheep’s clothing”.
All the way to the president
Concerns about the ‘awakened’ politics of ESG do not only live in the dark corners of the internet. In the US it has become a mainstream fixation. Anti-ESG opinions abound on the pages of The Wall Street Journal and on the Fox News infotainment network. It is a hot battlefield in the culture wars.
In 2020, the Trump administration introduced a rule requiring pension funds to put “economic interests” above “non-monetary” interests — in other words, to force them to ignore issues of long-term social and environmental sustainability and focus on to focus on short-term profit.
Read more: Sustainability rankings don’t always identify sustainable companies
The Biden Administration this plan reversed. But last month the The US Congress has passed a bill to reverse that U-turn, with support from two Senate Democrats. Biden then used his presidential power to veto the bill — the first veto of his presidency.
In all likelihood, ESG will be a major campaign theme in the 2024 presidential election. The Speaker of the House of Representatives with a Republican majority, Kevin McCarthy, has accused Biden of wanting “Wall Street to use your hard-earned money to fund a far-left political agenda.” So has been Republican presidential nominee and Florida Governor Ron DeSantis rail hard against the “woke ESG financial scam”.
Justin Lane/EPA
A brief history of stakeholder capitalism
What is striking about all these emotional charges against ESG is that they show little understanding of how capitalism works.
This is the point Fink made in his annual 2022 letter to the CEOs of the companies in which BlackRock has invested client money.
In today’s world, which is globally interconnected, a company must create value for and be valued by all stakeholders in order to create long-term value for its shareholders. It is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve sustainable profitability, and value is created and retained over the long term. Make no mistake, the honest pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine the success of your business.
The idea that entrepreneurs have responsibilities to society at large is not new. In any case, it dates back to the past until the 17th century when the modern corporate form began to emerge through innovations such as joint stock ownership and the legal privilege of limited liability.
The origins of the corporate social responsibility and ethical investing movements can also be traced back hundreds of years – generally to groups and individuals motivated by religious values – and have been mainstream business ideas for decades.
Why? Because, according to ESG proponents, attention to social and ecological sustainability pays off better long-term investment returns. If it wasn’t, companies wouldn’t be interested.
Arguing about the best way to practice capitalism
This is not to say that the application of ESG principles is not above criticism – for going too far, or not going far enough – as mere window dressing for the status quo.
Read more: ESG investing has a blind spot that calls into question the sustainability promises of the $35 trillion industry: supply chains
But such arguments are over the best way to practice capitalism. It’s all about how far from interest in a neo-marxist uprising as one can imagine. Debating the best way to create shareholder value has nothing to do with wanting onerevolutionary dictatorship of the proletariatand see private property abolished – main features of Marxism.
Justin Lane/EPA
Capitalism is changing, that’s for sure. But it does so in a way that has accepted and commercially exploits changing public opinion on climate and social inequality.
This is what businesses do that make money. They listen to customers and other stakeholders – their employees, suppliers, the communities in which they operate and the governments that regulate them. They make plans for the future. They limit future risks.
Impoverished democracy
So what explains this fantastic rhetoric about ESG as the path to Marxist tyranny? In my opinion, it shows how much the intellectual foundations of conservatism and liberalism have been eroded in a media market that favors reactionary emotionality over tempered thought.
Economic conservatism (rooted in beliefs in free markets, globalization and small government) has become disconnected from social and political conservatism (particularly with regard to climate activism, social justice and diversity and inclusion).
All of this is a fatal distraction from the wider political and economic problems we face both locally and globally. It leads to serious discussions – like what to do economic inequalitypolitical polarization and declining social capital – into the background.
Read more: Hijacking fear: how Trump weaponized social alienation into ‘racial economy’
There are sharp criticisms of ESG that don’t make the headlines. It’s not often you hear of corporate-friendly ESG advocates campaigning for minimum wage increases, progressive taxes, employee solidarity, or the need to curb the runaway train of executive compensation. Climate and social justice are pressing issues, that’s for sure. But they must not push fair economic distribution and shared prosperity off the agenda.
Ironically, the false labeling of ESG as a Marxist conspiracy also helps. It serves the interests of the elite populist pundits and politicians claim to be against. It goes against the interests of the working class people they claim to care about. That is not socialism.
